January 29, 2015 / 12:37 PM / 3 years ago

UPDATE 3-Colgate reports rise in key sales metric, sees margins improving

(Adds company comments from conference call, details, updates shares)

By Nandita Bose and Yashaswini Swamynathan

Jan 29 (Reuters) - Colgate-Palmolive Co on Thursday reported a rise in an important sales metric, sending its shares up 6 percent as investors shrugged off a lowered earnings forecast.

The consumer products maker, which controls nearly 45 percent of the global toothpaste business, said fourth-quarter organic sales, which exclude the effects of foreign exchange, acquisitions and divestments, rose 6 percent because of higher volumes and better pricing.

Chief Executive Officer Ian Cook said on a conference call that sales volumes increased in all emerging markets despite the price hikes Colgate took to offset a strengthening dollar.

Cook also said Colgate expected gross profit margins to increase by 50 to 100 basis points in 2015 as it benefits from lower prices for oil and other commodities.

In the fourth quarter, gross margin fell 30 basis points to 58.8 percent from a year earlier due to higher raw material and packaging costs stemming in large part from unfavorable currency fluctuations.

Net sales suffered because of the strong dollar and weak demand in markets such as Brazil and Europe.

Net sales in Latin America, Colgate’s biggest market, fell 6 percent. Sales were down 7.5 percent in Europe and 10 percent in Africa but rose 4.5 percent in Asia.

Cook said foreign exchange volatility would remain a challenge in 2015.

The rise in the dollar over the past nearly nine months has reduced the value of overseas sales. A stronger dollar also makes U.S.-made products more expensive for consumers in other currencies and lowers demand.

Rival Procter & Gamble Co said on Tuesday that it no longer expected sales and core earnings to grow this year, blaming a strong dollar for its disappointing results and forecast.

Colgate’s fourth-quarter revenue fell 3.2 percent to $4.22 billion, meeting the analysts’ average estimate, according to Thomson Reuters I/B/E/S.

Net income attributable to the company rose to $628 million, or 68 cents per share, from $564 million, or 60 cents per share, a year earlier.

Excluding charges for restructuring and a European competition law matter, Colgate earned 76 cents per share. Analysts on average had expected 74 cents.

The company cut its forecast for 2015 earnings-per-share growth to a low single-digit percentage rate from the mid-to-high single-digits.

Colgate’s shares were up 6 percent at $69.04 in midday trading. (Reporting by Yashaswini Swamynathan in Bengaluru and Nandita Bose in Chicago; Editing by Kirti Pandey and Lisa Von Ahn)

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